Are You Managing Your Risks from Social Media?

Article Are You Managing Your Risks from Social Media?

Many organizations aren’t fully aware of the risks posed by social media or taking enough steps to minimize them.


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Twitter or Facebook could hit your firm’s reputation or attract hackers; a LinkedIn article could provoke regulators. Unfiltered social media platforms come with reputational risks, cybersecurity vulnerabilities and maybe even regulatory penalties. Yet, companies love the direct communication access that social media give investors, customers and even competitors. Thus, today’s businesses need smart social media policies and procedures. One step is to empower internal auditors to monitor and evaluate the risks. In fact, a survey of auditors is the informational base of this report by David Houghton, Emily S. Keenan, Mark Edmonds and Leslie H. Blix of the MIT Sloan Management Review.  

Summary

A company’s internet and social media presence serves vital functions in communicating with stakeholders, but it entails significant risks.

Social media posts by employees and customers can damage a company’s reputation. Ill-considered use of public internet platforms can even open a business to regulatory investigation and sanctions, as happened in the aftermath of Elon Musk’s reckless Tweets about Tesla.

Netflix CEO Reed Hastings ran afoul of the US Securities and Exchange Commission (SEC) in 2012 when he posted numbers on his personal Facebook page about Netflix’s rapidly growing video-streaming statistics. The market responded to Hastings’ post; Netflix’s trading volume exploded by 700% with a 20% share price leap.

Employees’ use of social media can create cybersecurity vulnerabilities that criminal hackers can exploit. Internal auditors play an important role in assessing and monitoring the business risk associated with social...

About the Authors

David Houghton teaches marketing at Williams College of Business, Xavier University. Emily S. Keenan is an assistant professor of accountancy at Ohio University. Mark Edmonds teaches accounting and finance at the University of Alabama, Birmingham. Leslie H. Blix is an assistant professor of accounting at Sam Houston State University.


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